Analysis: FHA Loans Most Popular in Rhode Island, Mississippi, Maryland

According to data collected by the Urban Institute, Rhode Island is the number-one state in the country for FHA loan usage. Mississippi and Maryland also had a relatively high percentage of FHA loans last year, compared to the nation as a whole.

FHA Loans Most Popular in Rhode Island, Mississippi & Maryland

The Urban Institute (an economic research group based in Washington, D.C.) conducts extensive research into various housing-related trends in America. Among other things, they gather data relating to the different kinds of home loans that are used by borrowers nationwide, and at the state level.

Their website offers an interactive map tool that gives insight into all kinds of housing and mortgage-related metrics. We used that tool to determine which states in the U.S. had the highest percentage of FHA loans (as a share of overall mortgage lending activity).

As it turns out, Rhode Island is the number-one state in the nation in terms of FHA loan usage by borrowers. According to the Urban Institute, 38.5% of home buyers in Rhode Island used an FHA loan in 2017. That’s quite a bit higher than the national average of 24.8% during the same period.

While Rhode Island had the highest percentage of FHA loans among U.S. states last year, the conventional home loan still reigned supreme. Nearly 55% of home buyers in that state used conventional mortgage loans to finance their purchases last year.

Here’s the basic difference between these financing options:

FHA loans are insured by the government, via the Federal Housing Administration. Borrowers must make a down payment of 3.5%. Mortgage insurance is required and might have to be paid for the “life” of the loan.

Conventional loans are not insured or guaranteed by the government. Eligible borrowers could make a down payment as low as 3%. Mortgage insurance is typically required when the loan-to-value ratio is above 80%, but it can usually be canceled when the homeowner reaches 80% equity.

Mississippi and Maryland also had a relatively high percentage of FHA loans used by home buyers in 2017. FHA-insured mortgage loans accounted for 33.6% of all purchase loans in Mississippi last year, and accounted for 31.4% in Maryland. The national average was 24.8%.

Other Insights About Loan Programs

The Urban Institute’s interactive map reveals other insights regarding the type of home loan used in states across the country. Here are a few notable highlights:

Alaska and Hawaii had the highest percentage of VA loans last year, followed by Virginia. At 4.3%, the state of New Jersey had the lowest percentage of home purchases backed by a VA loan.

Among U.S. states, Wisconsin had the highest percentage of conventional loans among home buyers who purchased a property in 2017. Conventional mortgage financing accounted for 73.8% of purchases in Wisconsin last year.

Alaska, West Virginia and Mississippi had the highest percentage of low-down-payment home purchases (i.e., those with an investment of 3.5% or below).

On average, down payments were highest in Washington, D.C., California and Oregon. In those states, the percentage of home buyers who put down 20% or more was higher than all other states.

Among U.S. states, New York, Connecticut and New Jersey had the highest percentage of first-time buyers last year. In all three of those states, about 60% of home purchases in 2017 were made by first-time buyers.

Note: The Home Buying Institute offers a number of tutorials and explainers on the different types of loans that are available these days. Here’s a good starting point for additional research.